Exam 12: Organizational Structure and Performance Measurement

$\text { Reference: } 12 - 06$ The Baily Division recorded operating data as follows for the past two years: Year 1 Year 2 Sales ? \ 1,200,000 Stockholders' equity \ 540,000 720,000 Average operating assets \ 600,000 ? Margin 15\% ? Return on investment 22.5\% 18\% Baily Division's turnover was exactly the same in both Year 1 and Year 2. -The margin in Year 2 was?

Reference: 12-05 The Holmes Division recorded operating data as follows for the past year: Sales \ 200,000 Net operating income 25,000 Average operating assets 100,000 Stockholders' equity 80,000 Residual income 13,000 -For the past year, the turnover was?

$\text { Reference: } 12 - 10$ Harstin Corporation has provided the following data: Sales \ 625,000 Gross margin 70,000 Net operating income 50,000 Stockholders' equity 90,000 Average operating assets 250,000 Residual income 20,000 -Residual income is the net operating income that an investment centre earns above the minimum required return on the investment in operating assets.

Reference: 12-08 The following selected data pertain to Beck Co.'s Beam Division for last year: Sales \ 400,000 Variable expenses \ 100,000 Traceable fixed expenses \ 250,000 Average operating assets \ 200,000 Minimum required rate of return 20\% -Largo Company recorded for the past year, sales of $750,000 and had average operatin? assets of $375,000. What is the margin that Largo Company needed to earn in order to achieve an ROI of 15%?

Reference: 12-02 The following data are available for the South Division of Redride Products, Inc. and the single product it makes: Unit selling price \ 20 Variable cost per unit \ 12 Annual fixed costs \ 280,000 Average operating assets \ 1,500,000 -The Northern Division of the Smith Company had average operating assets totalling $150,000 last year. If the minimum required rate of return is 12% and if last year's net operating income at Northern was $20,000, then the residual income for Northern last year was?

Reference: 12-05 The Holmes Division recorded operating data as follows for the past year: Sales \ 200,000 Net operating income 25,000 Average operating assets 100,000 Stockholders' equity 80,000 Residual income 13,000 -The net operating income in Year 1 was?

$\text { Reference: } 12 - 10$ Harstin Corporation has provided the following data: Sales \ 625,000 Gross margin 70,000 Net operating income 50,000 Stockholders' equity 90,000 Average operating assets 250,000 Residual income 20,000 -The turnover for the past year was?

Reference: 12-08 The following selected data pertain to Beck Co.'s Beam Division for last year: Sales \ 400,000 Variable expenses \ 100,000 Traceable fixed expenses \ 250,000 Average operating assets \ 200,000 Minimum required rate of return 20\% -How much is the residual income?

$\text { Reference: 12-09 }$ The Northern Division of Gordon Company reported the following data for last year: Sales \ 900,000 Stockholders' equity \ 320,000 Operating expenses \ 700,000 Average operating assets \ 500,000 Interest expense \ 50,000 Tax expense \ 60,000 Minimum required rate of return 15\% -The residual income for the Northern Division last year was?

$\text { Reference: } 12 - 12$ The Sherlock Division recorded operating data as follows for the past year: Sales \ 300,000 Operating expenses 225,000 Average operating assets 225,000 Stockholders' equity 80,000 Minimum required rate of return 20\% -For the past year, the return on investment was?

For the past year, the turnover was?

Reference: 12-03 The Axle Division of LaBate Company makes and sells only one product. Annual data on the Axle Division's single product follow: Unit selling price \ 50 Unit variable cost \ 30 Total fixed costs \ 200,000 Average operating assets \ 750,000 Minimum required rate of return 12\% -If the Axle Division sells 16,000 units per year, the return on investment should be

Reference: 12-02 The following data are available for the South Division of Redride Products, Inc. and the single product it makes: Unit selling price \ 20 Variable cost per unit \ 12 Annual fixed costs \ 280,000 Average operating assets \ 1,500,000 -Delmar Corporation is considering the use of residual income as a measure of the performance of its divisions. What major disadvantage of this method should the company consider before deciding to institute it?

$\text { Reference: } 12 - 10$ Harstin Corporation has provided the following data: Sales \ 625,000 Gross margin 70,000 Net operating income 50,000 Stockholders' equity 90,000 Average operating assets 250,000 Residual income 20,000 -Cost centre managers are often evaluated by comparing actual costs under their control against budgeted or standard costs using variance analysis.

$\text { Reference: } 12 - 10$ Harstin Corporation has provided the following data: Sales \ 625,000 Gross margin 70,000 Net operating income 50,000 Stockholders' equity 90,000 Average operating assets 250,000 Residual income 20,000 -Some managers believe that residual income is superior to return on investment as a means of measuring performance, since it encourages the manager to make investment decisions that are more consistent with the interests of the company as a whole.

$\text { Reference: 12-05 }$ The Holmes Division recorded operating data as follows for the past year: Sales \ 200,000 Net operating income 25,000 Average operating assets 100,000 Stockholders' equity 80,000 Residual income 13,000 -For the past year, the minimum required rate of return was?

Reference: 12-07 The following selected data pertain to the belt division of Allen Corp. for last year: Sales \ 500,000 Average operating assets \ 200,000 Net operating income \ 80,000 Turnover 2.5 Minimum required return 20\% -Keeping all other factors constant, which of the following would not cause an increase in the ROI?

Reference: 12-12 The Sherlock Division recorded operating data as follows for the past year: Sales \ 300,000 Operating expenses 225,000 Average operating assets 225,000 Stockholders' equity 80,000 Minimum required rate of return 20\% -For the past year, the margin was?

$\text { Reference: 12-11 }$ The Millard Division's operating data for the past two years are provided below: Year 1 Year 2 Return on investment 12\% 36\% Stockholders' equity \ 800,000 \ 500,000 Net operating income ? \ 360,000 Turnover ? 3 Margin ? ? Sales 3,200,000 ? Millard Division's margin in Year 2 was 150% of the margin in Year 1. -The sales for Year 2 were?

Reference: 12-11 The Millard Division's operating data for the past two years are provided below: Year 1 Year 2 Return on investment 12\% 36\% Stockholders' equity \ 800,000 \ 500,000 Net operating income ? \ 360,000 Turnover ? 3 Margin ? ? Sales 3,200,000 ? Millard Division's margin in Year 2 was 150% of the margin in Year 1. -The net operating income for Year 1 was?